WHERE TO ENTER Location

Cambodia is located in the heart of Southeast Asia. It is surrounded by Thailand to the west and northwest, Laos to the northeast, Vietnam to the east and southeast, and the Gulf of Thailand to the south. The country has easy access to seaports and airports, and is rich in natural resources and world wonders. Cambodia is strategically located for a world-connected business operation. There are 24 Provinces whereby you can choose to have your business there. 1. Banteay Meanchey 2. Battambang 3. Kampong cham 4. Kampong chhang 5. Kampong speu 6. Kampong thom 7. Kampot 8. Kandal 9. Koh Kong 10. Kratie 11. Mondol kiri 12. Phnom Penh 13. Preah vihear 14. Prey veng 15. Pursat 16. Ratanak kiri 17. Siemreap 18. Sihanouk ville 19. Stung treng 20. Svay rieng 21. Takeo 22. Oddar meanchey 23. Kep

24. Pailin

Cambodia is a developing market economy that grew at an average rate of over 10 percent from 2004 to 2007, driven largely by an expansion in the garment sector, construction, agriculture, and tourism. Growth dropped to below 7% in 2008 and is estimated to have contracted by 2% in 2009 as a result of the global economic crisis. Roughly one-third of 13.3 million Cambodians live in poverty, however the government hopes to raise the living standard of citizens through one of the most liberal investment regimes in Asia. -established in 1993 after more than two decades of civil war and communist rule, including the period 1975 1979 when the Mao-inspired Khmer Rouge killed most of Cambodias intellectuals and capitalists. The most recent 2008 coalition government dominated by the Cambodian Peoples Party pledged to devote its full energies to accelerate economic development through the implementation of an ambitious economic and political reform program.

Cambodia became the first LDC to join the World Trade Organization (WTO) in 2004, trade has steadily increased, and the U.S. has been Cambodias largest trading partner. In 2009, exports to the U.S. were $1.9 billion, at least 58 percent of Cambodias total exports, primarily consisting of garments and footwear. U.S. exports to Cambodia in 2009 were $127 million, down 17 percent from 2008. In July 2006, the United States signed a Trade and Investment Framework Agreement (TIFA) with Cambodia to promote greater trade and investment in both countries and provide a forum to address bilateral trade and investment issues.

Trade Area (AFTA), which will enhance regional trade as tariffs within ASEAN are lowered to zero to five percent by 2015. Concurrent with ASEAN integration, an interconnected series of highways, railways, power, and telecommunications is being implemented in the Greater Mekong Subregion (GMS) countries of China, Thailand, Myanmar, Laos, Cambodia, and Vietnam which will greatly enhance intraregional trade.

Wat. Tourism has increased more than eleven-fold since 1998 when Cambodia received a modest 187,000 tourists, with the number of foreign arrivals exceeding 2 million in 2009. The government is now looking to diversify tourism options by opening up ecotourism and beach tourism attractions throughout the country, as well as taking advantage of UNESCO World Heritage status granted in July 2008 to the Preah Vihear temple.

agriculture sector employing approximately 80 percent of Cambodias population. Cambodias primary crop is rice, production growth of which over the past 10-12 years has been surprisingly strong, increasing at a 9 percent annual growth rate. At the same time, rice exports have increased from zero in Market Year (MY) 2000/01 to an estimated 800,000 tons this year (MY 2009/10). The country also exports fish, rubber, cassava, corn, and other plantation crops. Improvements in infrastructure,

agricultural inputs, and farming practices could significantly increase agricultural yields. Cambodia also has a large amount of uncultivated arable land; however, due to decades of civil war and communist rule, determining legal ownership is tenuous in many cases as most land ownership is not yet titled. dia with financial support accounting for at least 50% of the government budget. Bilateral and multilateral donors such as the World Bank, IMF, and Asian Development Bank support and closely monitor the governments reform program. The U.S. is one of Cambodias largest donors and official U.S. assistance amounted to over $62 million in 2009, up from $36 million in 2002.

countries such as Malaysia, China, Korea, Thailand, and Vietnam. Approved investment proposals by the Council for the Development of Cambodia surpassed $11 billion in 2008. The Cambodian government currently offers a generous package of incentives to foreign investors and imposes few restrictions on imports from abroad. Market Challenges Return to top

communist rule, the country ranks very poorly on World Bank, Transparency International, and the Global Forum surveys related to business climate. Significant challenges commonly cited by the private sector include pervasive corruption, poor infrastructure, weak institutions, and undeveloped human resources. Market Opportunities Return to top rs potential investment opportunities in tourism infrastructure and resorts; education; architecture, construction, and engineering services; household goods and appliances; agribusiness and food processing; used cars and automotive parts; power generation equipment and power transmission infrastructure; fast food and beverage franchises; pharmaceuticals, medical supplies, and medical equipment; and banking. Market Entry Strategy Establishing an Office Return to top The Council for the Development of Cambodia (CDC) approves applications for investment incentives pursuant to the amended Investment Law adopted in 2003. The Cambodian Investment Board (CIB), a division of the CDC, is responsible for accepting and reviewing applications for investment incentives. Investors seeking incentives should file an application including an investment proposal with the CIB. While the application fee can be substantial about $1,500-$2,000 for processing the incentives provided usually make the effort worthwhile (see Chapter 6 of this guide for details).

From the date of submission of the application, the CIB has three working days to issue a Conditional Registration Certificate or a Letter of Non-Compliance to investors. If the CIB fails to issue the Conditional Registration Certificate or Letter of Non-Compliance within three working days, then the Conditional Registration will be taken to have been approved. A Final Registration Certificate must be issued within 28 working days of the issuance of the Conditional Registration Certificate. A Final Registration Certificate will be revoked if the investor does not carry out an investment activity within six months of the receipt of all the required documents or the investor obtained a Final Registration Certificate through fraud or misrepresentation. Upon receipt of an agreement in principle (Final Registration Certificate) from the CIB, the investor prepares registration forms for filing with the Ministry of Commerce. The Ministry of Commerce issues the formal business license. Investors not seeking incentives, or who are ineligible, must register companies directly with the Ministry of Commerce. The CDC-promoted sectors include agriculture and agro-processing industries, manufacturing, export-oriented industries, infrastructure development, international standard hotels, and environmental protection activities. U.S.-trained attorneys who wish to establish an office in Cambodia are required by terms of the bar statute, passed in June 1995, to affiliate with an attorney licensed in Cambodia. The Law on Commercial Enterprise provides a comprehensive legal framework for the establishment and operation of businesses. The forms of business organization include a limited liability company, branch office, representative office, partnership, and sole proprietorship. A limited liability company refers to a company in which liability of shareholders is limited to capital contribution. It is the most common business form. The establishment requires a minimum capital at $1,000. It can be 100% Cambodian-owned, 100% foreign-owned, or any combination thereof. A limited partnership is a contract of partnership between one or more general partners who are the sole persons authorized to administer and bind the partnership, and one or more limited partners, who are bound to contribute to the capital of the partnership. Each limited partner is entitled to receive his share of the profits and liable only to the extent of the sum of money or value of the property he agrees to contribute. The general partners are jointly and severally liable for the debts of the partnership to third parties. Another legal form of business that can be established by eligible investors is a representative office, which is primarily designed to serve as a channel for promoting and marketing products. Such an office can be well suited for American firms wishing to sell products in the country to gain entry to the Cambodian market. A representative office can also facilitate sourcing local goods and services and collecting local information for the home company.

Foreign companies can also establish branch offices and subsidiaries in the country. A branch office may perform the same acts as a representative office and, in addition, may regularly buy and sell goods and services and engage in manufacturing, processing and construction as a local enterprise as long as it does not perform acts prohibited by law to a foreign natural or legal person. A subsidiary is a company that is incorporated by a foreign company in Cambodia with at least 51% of its capital held by the foreign company and has a legal personality separate from the principal. A subsidiary may be incorporated in the form of a partnership or limited company and may conduct business the same as a local company except for any act that is prohibited by law to a foreign natural or legal person. Franchising Return to top While Cambodia currently has no special laws regulating franchises, the Commercial Enterprise Law has a provision to cover franchises. Cambodian businesses are eager to become a franchisee of U.S. brandname companies. Direct Marketing Return to top Cambodia is flooded with foreign-made products, particularly from neighboring countries. The main attraction of foreign products is their perceived superior quality, reliability, and status. Products from developed countries such as the U.S. and Japan are perceived as having the highest quality and status. Products from the U.S. are highly thought of and popular in Cambodia, and as a result, a wide variety of U.S products, often purchased through U.S. wholesale outlets and shipped for resale in Cambodia, are available in Cambodian markets. There is little direct marketing of U.S. products in Cambodia. In general, direct marketing techniques such as telemarketing and door-to-door sales are new concepts to Cambodian consumers, albeit some businesses have used these techniques to promote their products. Telemarketing via mobile phone targeted at younger Cambodian consumers has become increasingly popular in recent years. Joint Ventures/Licensing Return to top Joint ventures are common, but no special laws apply. Selection of a suitable joint venture partner is very important, and great care should be taken to ensure that potential partners are suitable for your business. After entering into a local partnership, it may be difficult to dissolve the relationship without consent of the local partner. The prevailing commercial environment requires significant due diligence review of potential joint venture partners, and all terms of the agreement should be clearly articulated including provisions for dispute resolution. Joint ventures with the government exist; the government contributes a majority share, generally in real estate, while the foreign joint venture partner, with a minority share, brings cash or equipment to the deal. The government percentage fluctuates widely. Selling to the Government Return to top

Cambodias government procurement regime is governed by a 1995 sub-decree. The sub-decree requires that all international purchases over 200 million Riel ($50,000) for civil work and 100 million Riel ($25,000) for goods be made through public tender. While Cambodia has clear regulations pertaining to government procurement, the conduct of procurement is often nontransparent. The Cambodian government often provides short time frames to respond to public announcements of tenders, which frequently are not widely publicized. Cambodia is not a signatory to the WTO Agreement on Government Procurement. Distribution and Sales Channels Return to top There are three widely used distribution channels. Wholesalers import goods and then sell the goods to retailers. In some cases, the wholesalers provide delivery service, credit, and warranties to small shops or stands in the local markets. Some sellers reach consumers through their own retail shops or via vans travelling throughout the country. Finally, sellers who have no retail shops sell directly to customers by advertising in newspapers, and on radio and television. Legitimate importers may obtain exclusive rights to import products of particular brand names from the Ministry of Commerce. Cambodia places almost virtually no restriction on foreign participation in the import/export and distribution sectors. In addition to the traditional markets, Cambodias retail landscape is undergoing rapid transformation. Cambodia has witnessed a growth of western-style shopping malls, mini-marts, convenience stores and supermarkets, catering mostly to social elites, the urban middle class, and expatriates. Some of the western-style markets in town include Lucky Market, Super Pencil, Thai Huot Market and Bayon Market. Shopping malls include Sorya, Sovanna, and City Mall, with several more ambitious projects proposed by various Cambodian and international developers. Selling Factors/Techniques Return to top The adult literacy rate in 2008 was about 74 percent, and approximately 80 percent of the population lives in rural areas. Print media is unlikely to be the most effective method to reach potential consumers. Broadcast advertising is likely more effective as it reaches the widest audience. Foreign companies also make use of trade fairs. The Cambodian Ministry of Commerce and foreign companies from Thailand, China, and Vietnam have organized a number of trade fairs, which are gaining popularity. Awareness of brands is still limited and low in Cambodia although brand loyalty has increasingly become a trend for durable products and health-related products among the elite class. In general, as most Cambodians are poor, prices still matter the most. Electronic Commerce Return to top E-commerce is relatively undeveloped, although some local banks have begun to issue credit cards in order to facilitate purchases made via the Internet. Some of the impediments to the development of the e-commerce include inadequate internet infrastructure, low levels of internet use, and extremely

limited credit card use. There is a growing number of online shopping websites that cater mostly to the small number of urban consumers with access to the internet, though the profitability of such commerce is still questionable. Trade Promotion and Advertising Return to top Advertising and trade promotion are important marketing tools in Cambodia. Local vendors use a variety of advertising methods. Special promotional campaigns might be conducted at local markets, shops, restaurants, Internet cafs, and movie theaters to reach the public. Giving gifts, discount coupons, or lucky draws for items including money, gold, motorcycles, cars, or electrical appliances is a common and effective promotion technique. Although newspaper advertising is often used, radio and television are also effective means of reaching the Cambodian public. Khmer language newspapers are often linked to political parties, and press runs for the smaller publications are very limited. Published in the capital, the major dailies are distributed to the larger provincial cities. Ratings and market share of various broadcast outlets and programs are not routinely determined, since no local equivalent of Nielsen or Arbitron exists. Instead, stations commission occasional small surveys to determine audience size and programming preferences, and university students sometimes do similar studies as academic projects. According to a public survey on radio programming conducted by the International Republican Institute (IRI), FM 105 and FM 103 are the most popular radio stations in Cambodia. The most popular television channel is CTN. Billboards are present on many streets in Phnom Penh and are used in provincial capitals as well. Leaflets and mobile loudspeakers are also popular advertising and campaigning techniques, especially among political parties.